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LIFE INSURANCE

LIFE INSURANCE FORM







Overview

“Life Insurance is a contract between a policyholder and an insurer that provides financial coverage to the insured and his/her family. In life insurance the insurance company guarantees to pay a sum of money in return for a regular premium after a fixed period of time or upon the unfortunate death of the life insured person.”

A life insurance policy is a scheme that offers guaranteed financial protection for a specific term against the death of the policy holder. The financial protection offered as the sum assured on death of the life assured is payable to the assigned beneficiary of the life insurance policy. The insurer pays out the promised benefit amount either on the death of the life assured (as mentioned earlier) or at the end of the policy term on the date of maturity.

What is a Life Insurance Premium?

A life insurance premium is a payment that is to be paid to enjoy the life insurance benefits. The premium is paid annually; however, the mode of premium payment can be selected from monthly or half-yearly also. This premium also helps to grow the cash value of the insurance.

The insurance company determines the premium payable by the policyholder to the insurance company. Having said that, the buyer gets to select the term of the policy

Benefit of Insurance To Insured

Term insurance is the most basic form of life coverage. It isaffordable life insurance that one can buy easily, without anyhassles.Simply put, a term insurance plan offers death cover for astipulated time period. God forbid, in the event of the suddendemise of the insured during the policy tenure, the insuranceprovider offers a pre-decided death benefit as a lump sum, as amonthly/ annual pay-out, or as combined benefits to the nominee.The best term plan offers comprehensive coverage at a competitive premium.

A unit-linked insurance plan or ULIP is a type of life coverage plan that offers a perfect blend ofinsurance & investment. It comes with a long-term investment opportunity along with valuableinvestment flexibility.The premium paid towards a ULIP is partly used as a risk-cover for life coverage plan and theremainder is invested in market funds such as debts, equities, bonds, market funds, hybrid fundsetc. The selection of the market funds depends purely on the risk appetite of the insurancebuyer. Based on that, the insurer invests the amount in the capital market as per the insured'spreference.

Endowment plans are also known as traditional life insurance plans. These plans come with an element of saving. As compared to the risk factor of other investment products, the risk involve dis lower (so are the returns).An endowment policy is a combination of a life coverage plan and savings plan. It invests a particular amount in life coverage and the remaining amount is invested by the provider. In case the policyholder outlives the policy term; the insurance provider offers a maturity benefit to him/her. Furthermore, some insurance endowment policies may offer bonuses on pre-specified periods. If applicable, the bonuses are paid either to the policyholder at the time of policy maturity or to the nominee in case of a death claim.

A whole life insurance plan offers life coverage as long as the insured lives. There are a few providers that offer life coverage up to 100 years of age. Contrary to the coverage offered by term plans, this plan offers extensive coverage.The sum assured is computed when the life coverage plan is purchased and is payable to the nominee after the demise of the insured. Along with the sum assured, bonuses (if any) are also paid to the nominee. It is one of the best policies that offer coverage up to whole life at low premiums.

A variant of whole life is available in the market that clubs the benefits of life insurance plans with ULIPs. A whole life ULIP offers extensive coverage along with high returns. Please Note- In case the policyholder outlives the 100 years of age, the insurer pays the benefit of matured endowment coverage to the policyholder.

A child plan acts as a tool to generate funds for the policyholder’s child. A child plan helps one build a corpus for their child that can be used for the child’s education and wedding. Generally, child plans either provide benefits as instalments on an annual basis or a 1-time payout once the insured child is 18 years of age. In an unfortunate event of the untimely demise of the policyholder during the policy term, immediate premium payment is payable

A retirement plan, also known as an annuity or pension plan, helps the insured accumulate a corpus for their retirement. Typically, retirement plans provide benefits in the form of installment on an annual basis or a 1-time pay-out once insured is 60 years of age. In case the insured outlives the policy term, the plan offers vesting benefit. In case of the insured's demise, it offers the death benefit to the policy nominee. Note- In case of the insured's demise while the policy is active, the life insurer pays a pre-decided amount to insured's nominee.

If you plan to purchase a life insurance plan, you may have heard of several types of policies such as permanent life insurance and term life insurance. While both the policies offer benefit to the family in case of the unfortunate demise of the policyholder, these plans vary in different ways:

Term insurance plans offer protection for a fixed tenure, whereas permanent insurance has flexible terms, it generally covers until the life assured reaches 100 years of age.

The premium amount paid for a permanent life insurance policy is invested in other investment tools. If the insurance company makes a profit, then a share of it is paid to the life assured as a bonus or investment return. In a term plan, the life assured does not get any returns.